Major Cash Management

In small businesses many payments were received in paper form, requiring manual intervention by the bank, which in turn raised both the costs for the client and the possibility of error. In short, accounts receivables financing services required the remitter of funds to provide complete information - if possible electronically - allowing the beneficiary to gain some control over the reconciliation process.

The banks faced two main problems with these services:

* Their inability to adequately address client frustrations with the reconciliation gap and

* The lack of standardization in order to efficiently attract further clients with their solutions.

This missing integration with the underlying ERP systems meant that banks had to custom build solutions for each client usually from scratch - putting a further drain on limited in house technology resources. Furthermore, the problems were regularly multiplied as the data feed containing the invoice details to print and post was separate from the delivery of data to reconcile outstanding accounts receivables.

Consequently, the banks' inability to leverage existing solutions hampered progress in this area. Over the last 18 months, and looking forward to the new millennium, it could easily be argued that the time has come for a more radical and efficient mechanism to be put in place. We are entering a new age of commercial partnership in which commercial and technological integration is a far more effective approach to meet client requirements than the more traditional approach.

In this millennium we can expect to see a continuation of the trend by large corporates to focus on a select band of four or five main ERP systems. At the same time these technology providers will continue to improve their systems' functionalities in order to incorporate far more sophisticated reconciliation and receivable-management databases, coupled with a more flexible approach to receiving data files from third party providers. This means that rather than delivering to a corporate a file containing exceptions/unmatched items under the traditional receivables matching services, banks can now deliver a complete file of collections and allow the client's own ERP system to carry out the reconciliation process.

Parallel to this, the major cash-management banks have been working hard on their collections platforms and several can now boast sophisticated translation systems for the main ERP systems. At selective banks the data exchange has been elevated to a level of efficiency qualifying them for formal certification of their technologies' compatibility with leading ERP systems.

This has only been possible through a fundamental change in attitudes as both banks and ERP vendors have recognized the increasing need to cooperate and share information to deliver solutions to their mutual client base if they are to succeed in the new environment.

This increased connectivity provides an ideal opportunity to review the entire accounts receivable proposition and look at ways to improve this process. In future, corporatism will be able to leverage their investments in ERP systems by generating collection files which are sent directly to the banks, using direct debit as their primary collection mechanism. This is an opportunity for both banks and clients to create a fully automated, electronic cash collection process. In turn, this will generate cost savings at the processing level whilst also providing improved cash forecasting and enhanced liquidity-management capabilities.

Account Receivables